The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has recently introduced a new federal reporting requirement for beneficial ownership information (BOI). Starting January 1, 2024, many companies operating in the United States must report information about their beneficial owners to FinCEN. This move aims to promote transparency and combat financial crimes by identifying individuals who own or control a company, making it more difficult for them to conceal their unlawfully acquired assets through shell companies or complex ownership structures.
Please read our latest article that explores the specifics of Beneficial Ownership Information Reporting, including its scope, the entities required to comply, and the steps involved in navigating the reporting process.
Beneficial ownership refers to the individuals who have significant control over a company or enjoy the economic benefits of its assets. These individuals may include shareholders, partners, or limited liability company members (LLC).
Companies that fall under the definition of reporting companies will need to comply with the BOI reporting requirements. A required reporting company is a corporation, LLC, or any other entity created in the United States by filing a document with a secretary of state or a similar office. Foreign companies registered to conduct business in any U.S. state or Indian tribe are also reporting companies.
While many companies will need to report their beneficial ownership information, there are exemptions for certain entities. Publicly traded companies, nonprofits, and certain large operating companies are among the 23 types of entities exempt from the reporting requirements. To determine whether your company qualifies for an exemption, refer to FinCEN's Small Entity Compliance Guide, which provides checklists for each exemption.
| 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 | Securities reporting issuer Governmental authority Bank Credit union Depository institution holding company Money services business Broker or dealer in securities Securities exchange or clearing agency Other Exchange Act registered entity Investment company or investment adviser Venture capital fund adviser Insurance company State-licensed insurance producer Commodity Exchange Act registered entity Accounting firm Public utility Financial market utility Pooled investment vehicle Tax-exempt entity Entity assisting a tax-exempt entity Large operating company Subsidiary of certain exempt entities Inactive entity |
Reporting companies must submit their beneficial ownership information electronically through FinCEN's website. The reporting system, available at www.fincen.gov/boi, will confirm receipt once the report is successfully filed. It is important to note that FinCEN will only accept reports beginning January 1, 2024.
The reporting deadlines for beneficial ownership information depend on the creation or registration date of the company:
A beneficial owner is an individual who directly or indirectly exercises substantial control over a reporting company or owns or controls at least 25% of its ownership interests. Substantial control is described in numerous ways, including being a senior officer, having the authority to appoint or remove officers or directors, being a vital decision-maker, or exercising any other form of substantial control.
It is important to note that not all individuals associated with a reporting company are considered beneficial owners. Professionals such as accountants or lawyers providing general advisory services are generally not considered beneficial owners. However, if these professionals meet substantial control or ownership criteria, they may be considered beneficial owners.
Additionally, there are exceptions to the definition of a beneficial owner. For example, individuals who qualify as nominees, intermediaries, custodians, agents, or who hold certain positions within the reporting company may be exempted. It is crucial to review the exceptions to determine if they apply to specific individuals associated with the reporting company.
The reporting of Beneficial Ownership Information is crucial for several reasons. Primarily, it helps law enforcement agencies and regulatory bodies in their efforts to combat money laundering, terrorist financing, and other financial crimes. By knowing who owns and controls a company, authorities can better trace the flow of funds and identify potential risks.
It is essential for reporting companies to comply with Beneficial Ownership Information reporting requirements to avoid potential penalties. Failure to report or provide accurate information within the required timeframe can result in significant fines and legal consequences. The penalties may vary depending on the severity and extent of the non-compliance.
A FinCEN identifier is a unique number assigned by FinCEN to each reporting company or individual who files Beneficial Ownership Information reports. The identifier helps track and identify reporting entities and individuals, ensuring accuracy and consistency in reporting. While FinCEN identifiers are not yet required, they may be implemented in the future to enhance reporting efficiency.
FinCEN has published a Small Entity Compliance Guide to assist small businesses in complying with the BOI reporting requirements. This guide provides detailed information on the reporting rule's provisions, answers key questions, and offers interactive checklists, infographics, and other tools. You can also find the guide on FinCEN's Beneficial Ownership Information Reporting webpage at www.fincen.gov/boi.
For further guidance and updates, you can monitor FinCEN's website, read their FAQs, or subscribe to their updates at www.fincen.gov/subscribe. If you have any specific questions about the reporting requirements, you can contact FinCEN through their contact webpage at www.fincen.gov/contact.
Remember, compliance with the new reporting requirement is crucial to avoid penalties and ensure the integrity of the U.S. financial system. Stay informed and take the necessary steps to accurately and timely report your company's beneficial ownership information.